Watches of Switzerland backs FY guidance, hails 'strong' H1

Watches of Switzerland backed its full-year guidance on Wednesday as it reported a rise in first-half profit and revenue amid solid demand.

In the 26 weeks to 30 October, statutory pre-tax profit jumped 28% to £83m, while revenues increased 31% to £765m, or 23% at constant currency.

The company hailed continued strong demand for luxury watches and jewellery, with growth driven by increases in average selling price and volume.

The retailer pointed to ongoing strong momentum in the US, with revenue there up 86%, or 60% at constant currency, at £311m. In the UK and Europe, meanwhile, revenues were 8% higher versus the same period a year earlier at £454m, driven by domestic clientele.

Luxury watches continued to benefit from a strong demand environment, with revenue up 31%, driven by increases in average selling price and volume. Luxury jewellery also saw revenue growth, of 38%.

Chief executive Brian Duffy said: "Trading in the Holiday period so far has been in line with our expectations and our guidance for FY23 remains unchanged.

"We look ahead with confidence as we continue to deliver on our Long Range Plan objectives of maintaining our leadership position in the UK, becoming the clear leader in the US, and capitalising on the growth potential in Europe."

Russ Mould, investment director at AJ Bell, said: "While some people may only be able to afford small Christmas presents this year, there is also a large group of individuals who still have the means to splash the cash. That might explain why demand remains very strong for luxury goods such as Rolex watches.

"Many people are on waiting lists for watches, such is the demand, and a lot of these won’t even put the product on their wrist once obtained. It’s about prestige - either displaying the watch in a cabinet at home or storing it safely in the hope that it appreciates in value. Often shelling out tens of thousands of pounds, watches are serious purchases and history suggests they can significantly rise in value.

"Watches of Switzerland is investing heavily for the future by opening new showrooms and expanding geographically as it can see big opportunities. This isn’t a one-off craze, investing in watches is a trend that’s been in motion for decades.

"Its latest results show a business in perfectly decent health. Prices and volumes are up, and management has reiterated 2023 guidance which is becoming a rarity in a world where earnings forecasts are being downgraded across multiple industry sectors.

"The market focus remains short term, however, and investors have given the thumbs-down to the results. There’s been a slight dip in margins and a big drop in cash flow. The latter can partly be explained by having a big working capital outflow versus an inflow a year earlier."